T-Mobile and Sprint Merger: Texas Adds to the Hurdles

The T-Mobile-Sprint merger deal isn’t out of the woods yet. The merger got the green light from federal regulators. However, Texas joined more than 12 states that have sued to stop the T-Mobile-Sprint merger.

T-Mobile-Spring merger deal continues

Late last month, T-Mobile (TMUS) and Sprint (S) secured approval from the Department of Justice. The approval allows the companies to merge their operations. In order to gain approval, the companies agreed to drop certain assets and groom a competitor. T-Mobile and Sprint will sell certain wireless businesses and spectrum to Dish Network (DISH). Dish Network will create the country’s fourth national mobile operator. The Department of Justice demanded that T-Mobile and Sprint divest certain assets to preserve the competition in the US wireless sector.

Texas and the other states argue that T-Mobile and Sprint’s concessions aren’t sufficient. The states think that the T-Mobile-Sprint merger will reduce the competition in the US wireless market. They think that consumers might end up paying more for wireless services. Texas Attorney General Ken Paxton thinks that the merger would hurt working Texans.

AT&T’s home state sues to block the merger

Texas opposing the T-Mobile-Sprint merger is interesting for two reasons. First, mostly Democratic officials have sued to block the merger. A Republican official in Texas is leading the campaign to stop the merger. Second, Texas is AT&T’s (T) home state—one of T-Mobile’s fiercest competitors. AT&T’s corporate headquarters are in Dallas, Texas. Although the T-Mobile-Sprint merger will likely impact the company, AT&T hasn’t openly opposed the merger. Texas joined the opposition after T-Mobile executives attacked AT&T’s 5G strategy.

The trial for the anti-merger case will start in December. T-Mobile and Sprint need to close the merger quickly to avoid running into more problems. For example, closing the merger after January 2 would impact the financial terms. As a result, the companies might incur more costs than they expected. T-Mobile has already been counting its losses since the merger deal hasn’t closed. Recently, one of T-Mobile’s corporate clients dropped out due to frustrations about merger delay.

Merger deal looks like “do-or-die” for Sprint

T-Mobile and Sprint need the merger badly. Sprint executives have painted the picture of a struggling company that needs the merger to survive. The company lost 175,000 wireless subscribers in the second quarter, which illustrates its struggles. Sprint ended the second quarter with 54.3 million subscribers. T-Mobile added 1.8 million wireless subscribers in the second quarter. The company ended the second quarter with 83.1 million customers in total.

T-Mobile needs the merger to bring the spectrum together for efficient nationwide 5G deployment. T-Mobile started activating its 5G network last month. The company plans to reach nationwide coverage in 2020. T-Mobile has contracted Nokia (NOK) and Ericsson (ERIC) to supply it with the equipment for its 5G rollout. T-Mobile signed Nokia and Ericsson for 5G equipment contracts worth $7.0 billion combined. If the merger takes place, T-Mobile and Sprint will to invest as much as $40 billion in network developments.

The T-Mobile-Sprint merger deal was struck in April last year. In the past, AT&T’s acquisition of Time Warner also took a long time to close.